VodkaPundit

Cloud-y Skies Ahead

MICROSOFT

Tuesday was a bad day for stocks, but a terrible day for Microsoft. Barb Darrow explains why:

After the earnings call, Microsoft watchers seemed to remember that the company cash cows remain good old-fashioned Office and Windows, sales of which aren’t setting the world on fire. Sales in the company’s Commercial Division, which includes those products, missed expectations, logging “just” $10.68 billion for the quarter compared to the $10.94 billion that FactSet analysts had expected, according to Marketwatch.

Another data point: Revenue for Windows OEM versions of the operating system — which get pre-loaded on new PCs — fell 13 percent year over year. And Windows Volume licensing revenue grew just 3 percent, as CRN pointed out.

Making matters worse for Redmond’s bottom line, Windows 10 will be a free upgrade for many users, perhaps most. That’s $129 or so a copy Microsoft won’t be enjoying this cycle. But it’s far too soon to think CEO Satya Nadella is some kind of failure.

He’s moving Microsoft away from its old cash cows, and into platform-agnostic software and cloud services. (Nadella’s move matches the free advice I gave right on this page to former CEO Steve Ballmer years ago, and he didn’t listen. Did I mention he’s the former CEO? Anyway.)

Nadella has seen the future, and he’s executing about as well as anyone could hope. “Windows Everywhere” was always a bad idea, and the new “Microsoft Behind Every Scene” is much more in tune with the company’s strengths. But there are going to be bumps during the transition, and yesterday was a pretty big one.